Real estate managers' total assets, excluding real estate investment trusts, increased 20.7% to $620 billion in the 12-month period ended June 30, according to Pensions & Investments' annual survey of the largest real estate managers.
The top 50 managers of U.S. institutional tax-exempt assets saw their assets rise 19% to $323 billion. That was down from the 23.9% rise in tax-exempt assets exhibited in the previous year's survey, mirroring the slowdown in the U.S. commercial real estate market in the first half of this year. According to data reported by Global Real Analytics, a San Francisco real estate research firm, domestic commercial real estate rose at an 8% annualized rate in the second quarter, down from 14% in the prior quarter.
But overall assets rose 20%, a sizable increase from the year-earlier 12%. This year 101 managers reported real estate assets, three more than in 2005.
During the 12 months, the NCREIF Property index returned 18.7%.
With the exception of apartments, which were snapped up at rising prices for condominium conversions, property values were going up faster than income in the second quarter, said Daniel O'Connor, managing director, global forecasting and research with Global Real Analytics. But, Mr. O'Connor added, it is too early to tell whether the slowdown in the second quarter marks the beginning of a trend.
According to the 2006 P&I survey, the largest managers still control the bulk of the real estate assets under manage-
ment. The top 10 players control 61% of the total taxable and tax-exempt assets reported. The same is true when looking at U.S. institutional tax-exempt assets, with the top 10 managers handling 61%. Both are down one percentage point from the year-earlier survey.
However, the degree of success each manager had during the 12 months depended on whether the manager was in the fundraising, investment or sales phase of their funds' life cycles, said Gary Koster, director of the national funds practice at consulting firm Ernst & Young LLC., New York. Those at the start (fundraising) or at the end (selling holdings) of the cycle fared best, Mr. Koster said.